You're making the effort to stay on top of your estate plan. That's great! Now don't mess it up. Here is how to avoid five of the biggest blunders people often make.
Establishing an estate plan is extremely important. As life changes, it is necessary to update your plan to fit new circumstances. Whether it's a change in domicile, the death of a family member, new grandchildren or a significant change in assets, it is important to make sure you adjust your estate plan accordingly.
1. Focusing on updating a will or trust but forgetting to update ancillary documents
When updating an estate plan, people tend to focus on updating their Wills and Trusts without taking time to have their powers of attorney, health care directives or nominations of guardians reviewed and updated as well. This tunnel vision prevents them from completing a full update to their estate planning.
Yes, these ancillary documents are good forever, but that doesn't mean they should not be periodically reviewed and updated. Older templates become outdated. Addresses, phone numbers or even the agents themselves might require modification.
I recently had a client say his power of attorney was fine in its current form only to find out that the agents he had appointed years ago (his brother and sister) had since passed away. Clients should have their entire estate plan reviewed and not just focus on the will or trust.
2. Using flawed reasoning when selecting agents to act on your behalfI have many clients who select their executors and trustees and other agents by trying to appoint all their children together or appointing agents by age or profession instead of who is best suited to serve.
Each year I perform probate services on the estates of many people who spent the time and money having trusts created only to find that when they pass, they forgot to put beneficiary designations on their financial accounts held outside of the trust. Now, beneficiaries must go through the time and expense of probate, when preventing that issue was one of the primary plan objectives. The vehicle is important, but make sure what is inside is periodically checked as well.
4. Forgetting to update an estate plan when moving to another state
Estate planning documents drafted out-of-state, as long as they were drafted with the formalities and requirements of that state, will be effective in all 50 states. That being said, having out-of-state documents can unnecessarily complicate trust or estate administration, or the ability to exercise powers of attorney or health care directives.
Clients are always advised to update their plans when they move to another state to ensure the plan functions correctly. They might be legally effective, but there is no good reason to have a slew of estate planning documents from Michigan when you left that state five years ago and have no further connection to that state.
5. Forgetting to create an asset sheet of failing to keep that list updated
Most individuals, as they get older, accumulate a great deal of different assets and investments. Real property is easy to find, but accounts are not so easy to locate. It is not uncommon for someone to have stock and bond investments, life insurance, annuities, securities or other investments with many different institutions. I find it rare that someone has all of their investments with one company.
No one knows your financials like you do. When you update your estate plan, remember to create a list of your accounts and assets and update that list as things change. It is not important to put a value to the account, as those change over time. Make sure to include the name and location of the account and the last four digits of the account number. It is one of the most important things you can do for your beneficiaries to avoid an unnecessary treasure hunt for your assets when you're gone. Most individuals, as they get older, accumulate a great deal of different assets and investments. Real property is easy to find, but accounts are not so easy to locate. It is not uncommon for someone to have stock and bond investments, life insurance, annuities, securities or other investments with many different institutions. I find it rare that someone has all of their investments with one company.
As you spend the time and money to accomplish updates to your estate plan, you want to make sure you make the most complete revisions. When accomplishing changes, if you avoid the above mistakes, it will ensure that your plan is property updated and will not cause any unnecessary complications in the future.
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This article was provided by Richard M. Ricciardi Jr., Esquire , and brought to you by the Ronald J. Fichera Law Firm, where our mission is to provide trusted, professional legal services and strategic advice to assist our clients in their personal and business matters. Our firm is committed to delivering efficient and cost-effective legal services focusing on communication, responsiveness, and attention to detail. For more information about our services, contact us today!
This is not tax advice and should not be construed as such. Please seek professional tax services for more information and advice that will apply to your specific tax situation.